SUMMARY: We consider the implications of the government’s response to the consultation on the proposed changes to TUPE and draft regulations.

Introduction

We look in this update in some detail at the service provision change (“SPC”) proposal and also consider the other intended changes set out in the government’s response on 5 September 2013 and the draft regulations which were published on 31 October 2013. It is anticipated that the draft regulations will come into effect in January 2014.

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The TUPE Regulations

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) safeguard employees’ rights when the business (or part of the business) for which they work transfers to a new employer.

A transfer can take place where either there is a business transfer or where there is a SPC.

A SPC is where a client engages a contractor to do work on its behalf (outsourcing), engages a different contractor to do that work in place of the first contractor (retendering), or brings the work “in-house” (insourcing). This can for example occur when businesses contract out services such as cleaning or IT support to specialist providers.

There were concerns expressed that the SPC provision went further than was necessary under European law, imposing on businesses unnecessary legal obligations. One of the initial key proposals was therefore to remove the SPC section from the legislation.

In response to the government’s proposal to remove the SPC proposal, some were concerned that businesses would have entered into contracts on the understanding that TUPE would apply when the contract came to an end; if it did not (because of the removal of the SPC provision), there would be associated unexpected redundancy costs.

The Government’s Response

SPC

The government has now decided that in the main it will not adopt its proposal and will leave a SPC as a type of transfer where employees’ rights must be protected.

The government has taken into account the certainty that the TUPE provision relating to SPCs brings; if this provision did not exist then some cases of insourcing, outsourcing or retendering would fall within the business transfer definition anyway, but other cases would not. Those responding to the consultation felt this would lead to a greater number of disputes due to the uncertainty of whether TUPE applies or not.

However, the government has stated its intention to amend the legislation to clarify that the activities carried on after the change (or transfer) must be “fundamentally or essentially the same” as those carried on before it for TUPE to apply. It is questionable whether this will actually change the law at all, given that this seems to reflect current case law in any event.

Other intended changes

Other changes that the government intends to make in relation to TUPE include the following:

The requirement to provide employee liability information will be retained, but the information will have to be given 28 days before the transfer, rather than the current 14 days.

There will be a static approach to the transfer of terms derived from collective agreements and transferees will be able to change terms derived from collective agreements one year after the transfer, provided that the overall change is no less favourable to the employee.

Changes in the location of the workforce following a transfer will be expressly included within the scope of an economic, technical or organisational reason entailing changes in the workforce (ETO reason), thereby preventing genuine place of work redundancies from being automatically unfair. At the moment permitted changes are limited to a reduction in head count or change in job function.

Regulation 4 (restriction on changes to terms) and regulation 7 (protection against dismissal) will more closely reflect the wording of European legislation and case law. This is intended to weaken employees’ rights in relation to TUPE.

The Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) will be amended to clarify that consultation which begins before the transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and the transferee has carried out meaningful consultation. By way of a reminder, there are different collective consultation regimes for business transfers and SPCs under TUPE and collective redundancies.

Micro-businesses (i.e. businesses with fewer than 10 staff) will be allowed to inform and consult affected employees directly when there is no recognised independent union, nor any existing appropriate representatives.

DRAFT TUPE REGULATIONS PUBLISHED

SUMMARY: We consider the implications of the government’s response to the consultation on the proposed changes to TUPE and draft regulations.

Introduction

We look in this update in some detail at the service provision change (“SPC”) proposal and also consider the other intended changes set out in the government’s response on 5 September 2013 and the draft regulations which were published on 31 October 2013. It is anticipated that the draft regulations will come into effect in January 2014.

.

The TUPE Regulations

The Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) safeguard employees’ rights when the business (or part of the business) for which they work transfers to a new employer.

A transfer can take place where either there is a business transfer or where there is a SPC.

A SPC is where a client engages a contractor to do work on its behalf (outsourcing), engages a different contractor to do that work in place of the first contractor (retendering), or brings the work “in-house” (insourcing). This can for example occur when businesses contract out services such as cleaning or IT support to specialist providers.

There were concerns expressed that the SPC provision went further than was necessary under European law, imposing on businesses unnecessary legal obligations. One of the initial key proposals was therefore to remove the SPC section from the legislation.

In response to the government’s proposal to remove the SPC proposal, some were concerned that businesses would have entered into contracts on the understanding that TUPE would apply when the contract came to an end; if it did not (because of the removal of the SPC provision), there would be associated unexpected redundancy costs.

The Government’s Response

SPC

The government has now decided that in the main it will not adopt its proposal and will leave a SPC as a type of transfer where employees’ rights must be protected.

The government has taken into account the certainty that the TUPE provision relating to SPCs brings; if this provision did not exist then some cases of insourcing, outsourcing or retendering would fall within the business transfer definition anyway, but other cases would not. Those responding to the consultation felt this would lead to a greater number of disputes due to the uncertainty of whether TUPE applies or not.

However, the government has stated its intention to amend the legislation to clarify that the activities carried on after the change (or transfer) must be “fundamentally or essentially the same” as those carried on before it for TUPE to apply. It is questionable whether this will actually change the law at all, given that this seems to reflect current case law in any event.

Other intended changes

Other changes that the government intends to make in relation to TUPE include the following:

The requirement to provide employee liability information will be retained, but the information will have to be given 28 days before the transfer, rather than the current 14 days.

There will be a static approach to the transfer of terms derived from collective agreements and transferees will be able to change terms derived from collective agreements one year after the transfer, provided that the overall change is no less favourable to the employee.

Changes in the location of the workforce following a transfer will be expressly included within the scope of an economic, technical or organisational reason entailing changes in the workforce (ETO reason), thereby preventing genuine place of work redundancies from being automatically unfair. At the moment permitted changes are limited to a reduction in head count or change in job function.

Regulation 4 (restriction on changes to terms) and regulation 7 (protection against dismissal) will more closely reflect the wording of European legislation and case law. This is intended to weaken employees’ rights in relation to TUPE.

The Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”) will be amended to clarify that consultation which begins before the transfer can count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and the transferee has carried out meaningful consultation. By way of a reminder, there are different collective consultation regimes for business transfers and SPCs under TUPE and collective redundancies.

Micro-businesses (i.e. businesses with fewer than 10 staff) will be allowed to inform and consult affected employees directly when there is no recognised independent union, nor any existing appropriate representatives.